Cricket's prepaid offerings bolstered

Price war looming in wireless segment

San Diego's Leap Wireless has piled on extras to its Cricket prepaid wireless plans in advance of a price war brewing between providers of mobile phone services that don't require annual contracts.

The beefed-up Cricket plans, which range from $40 to $55, come as more competitors attempt to make inroads in the prepaid wireless market that has been dominated by Leap's Cricket service and Dallas-based MetroPCS. The most notable new competitor is Sprint's subsidiary, Boost Mobile, but there are others.

“Both Leap/Cricket and MetroPCS recently revised their unlimited plans,” said Michael Suby, director of Stratecast, a division of business consulting firm Frost & Sullivan. “Certainly (rival services) seem to have hit a nerve and gained some success.”

Boost increased subscribers by 770,000 in the second quarter and has added 1.3 million so far this year. The prepaid service has helped offset Sprint's loss of 2 million subscribers who sign annual contracts.

Prepaid companies offer flat-rate plans in which customers pay upfront for one month of service. They have no continuing contract commitment, so they can either prepay for additional months or drop the service.

Prepaid is a small but growing piece of the overall wireless subscription market. It targets young, urban customers, as well as those who want to scale back their wireless bills in the wake of the recession.

Leap, which reports second-quarter financial results tomorrow, said the perks added to its plans have been on the drawing boards for months and weren't enacted solely because of increased competition.

“We usually look at rate plans once or twice a year,” spokesman Greg Lund said. “For us, it's always in response to where do we need to adjust the rate plan to serve our customers better. Certainly competition comes into that, but it's not an overriding consideration.”

The San Diego company added unlimited Web access and unlimited directory assistance to its $40-a-month Cricket prepaid plan. The service already included unlimited local voice, long distance and text messaging.

Leap beefed up Cricket's $45-a-month plan with unlimited e-mail, data backup and 20 minutes of roaming, and it expanded its $55 plan to include those services plus 200 minutes of roaming.

Customers might pay $120 or more a month for similar services under an annual subscription plan. But these annual plans have nationwide and even international network coverage, so there are no roaming charges. With prepaid plans from Cricket and some others, there are roaming charges once a customer leaves his or her local market.

The additional features for Leap's $40 and $45 Cricket plans aren't available in the San Diego market, Lund said. But Leap has expanded the San Diego geographic area that's considered local and therefore free from roaming charges. The non-roaming area now ranges from Phoenix to Las Vegas to Los Angeles, Lund said.

Leap's Cricket Wireless, which has 4.3 million customers in 34 states, and MetroPCS were the main competitors in the prepaid category. They have their own networks in various cities. They compete against each other in a few cities, but they do not compete in most markets. They have long been considered merger candidates, and were in talks to join forces as recently as 2007.

Sprint's Boost Mobile shook up the prepaid market earlier this year when it offered an unlimited prepaid plan nationwide for $50 using its Nextel network.

Last month, Tracfone, a Mexican company that buys space on Verizon's network, announced it will be offering a $45 a month nationwide unlimited prepaid voice and text plan.

Wall Street analysts have been watching what steps Leap and MetroPCS would take to counter the competition. MetroPCS announced last week that it was revising its rate plans. And now Leap has followed suit by adding additional features.

Leap also plans to raise dealer compensation, said William Power, an analyst with investment firm Robert W. Baird & Co.

“The pricing and dealer compensation actions taken by Leap seem to acknowledge the increasing competition from Boost Unlimited and others,” Power wrote in a research note. “We are concerned that the competition could still worsen if and when Tracfone expands its Straight Talk offer, or others enter the unlimited field.”

Last week, Power downgraded his rating on Leap shares from “buy” to “neutral” largely because of growing competition.

While more rivals are targeting prepaid, fears of a rugged price war may be overblown. Matt Carter, president of Irvine-based Boost Mobile, told The Associated Press recently that the company would not get into a price war. “We don't believe price alone is the only thing that drives our purchase behavior here,” he said.

Leap announced its extra features late Monday. Its shares rose 4 cents yesterday to close at $25 on the Nasdaq Stock Market.